Marketing Simulation: Managing Segments and Customers

History of marketing simulation decisions

Prepared By Olga Sokolova

OneMBA 2021

Date: 16th of June 2020

The maximum run is 83.46 points (run #5).

The number of simulation runs allowed to make some conclusions mainly based on approaches as stated below:

- consistent approach and focus on the selected segment;

- monitoring of competitors behavior/benchmark of each of available attributes;

- perception of product by customers and following the demand of focused customer’s segment(-s).

1. Priority on segmentation and it’s impact on simulation attributes. The segment A was selected as a key one to
generate higher Net Margin results.

Segment C was also growing due to some attributes similarities with segment A requirements. Segment D and small
customers were growing due to discounts provision (step by step). Although there were no investing focus on
segment B requirement, there was an attempt to not loose segment B market share by minor discounts provision
(to provide a value for money). The balance of sales distribution impacted on segmentation shares (A-40%, B-25%,
C-30%, D-5%). Small customers were served by distributors, who were given generous discounts step by step
(although the market of small customers was under recession). In total 8 sales mangers as a headcount were
enough to serve large customer even for segment A, after refocusing on spending with small customers (reduced
by 0%).

In the beginning higher volume of existing customers allowed to generate higher revenue (due to some technological
gap it was quite complicated to acquire new customers). Later the volume of new customers acquirement were
increased mainly due to reduction on technological gap for battery life.

2. Proper product development focus & pricing approach as an outcome

In the beginning more investment were made towards batteries life in order to reach segment A expectations. It
allowed to increase market share of segment A and meet the segment’s expectations (within 1st runs there was an
attempt to cover both gaps: batteries and sensors). As the focus was made on large customers, manufacturing
process required higher efficiency due to the volume of investments. At first round investments into
‘manufacturing efficiency’ were underestimated a lot, although it impacted variable costs significantly. Within the
best run approximately 60% of product development costs spent on ‘manufacturing efficiency’ which allowed to
keep variable costs under control. Investments into sensors were minor due to primary focus into battery life
(segment A requirement). After necessary technological gap reduction, the annual price indexation was
implemented (2%). The market share was decreased right after that annual increase, although the next year the
market share was recovered almost for all segments, as competitors repeats the pricing changes. Moreover
discounts were provided to segment D,C which increase market share well the year after indexation. It allowed to
increase revenue generation and to not lose market share within the analyzed period. As segment C was less
sensitive to price changes, no discounts were provided from the start of simulation. To cover a technological gap
(minor investments were made to sensors size) minor discount was provided to segment B customers.

3. Marketing spending to support revenue trends

Market budget was decreased from the 1st year, but all four attributes/activities were run: ‘Integrated Marketing and
Training’ (to cover the sales headcount of 8 persons), ‘regular market research’ (to benchmark), ‘social media
spending’ and ‘direct customer communications’ were equally used on constant basis during the simulation. Over
the simulation repeating a revenue trend, marketing budget were increasing to cover a bigger market share. It was
explored that the marketing budget should be less than product budget due to type of industry implications.